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IIRC, when the Kindle was introduced ePub was still in the pipeline. At least it was not offered as a DRMed format on any reader at that time. Amazon purchased Mobipocket the summer before the Kindle was introduced so it makes business sense to stick with that format.
I've owned many of the ereaders on the market and I still prefer my Kindle to any other. Simplicity, ease of use, and the best customer service make it the obvious choice for me. It would be great if Amazon would offer ePub for all the other dedicated readers but I fear that antitrust regulations would be used against Amazon.
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